Climate Bill Analysis Part 14: Waxman-Markey Puts Ratepayers at Risk

According to a new analysis [pdf] by Public Citizen, the Waxman-Markey (W-M) climate legislation would inadequately protect American consumers from electricity price increases, despite claims by the bill's authors that the value of the free pollution allowances allocated to utilities would be returned to consumers. W-M grants 30 percent of all of the emission allowances to local distribution companies (LDCs) -- otherwise known as regulated utilities. The bill's authors suggest that 50 different state utility regulators will ensure that the benefits will be passed onto consumers.

W-M, writes Public Citizen's Director of Energy and climate, Tyson Slocum, "fails to limit compensation paid to utilities for managing any new programs for the 'benefit' of consumers, thereby delegating far too much discretion to unpredictable state regulators."

By contrast, the Edison Electric Institute (EEI), the DC lobbying arm of the electric utility industry, has called the LDC allocation approach a "critical" component of the climate legislation. EEI's members have decades of experience at state utility commissions figuring out ways to structure ratepayer "benefits" in ways that prioritize compensation to their shareholders, says Public Citizen.

The consumer protection organization also says that the climate legislation would likely benefit large electricity consumers over households. "Relying on 'electricity deliveries' disadvantages households at the expense of large consuming entities such as manufacturing facilities (oil refineries, etc) and large commercial buildings (office buildings, Wal-Mart, etc). If lawmakers are seeking to shield households from the impacts of higher prices from climate policies, ratepayer benefits should be allocated by revenue rather than electricity deliveries."

Public Citizen proposes that the legislation be changed in the following ways:

1. Explicitly define "Benefit" to the advantage of moderate- and low-income consumers. This could include dedicating 25% of the emission allowances to benefit households with incomes up to the state median income.

2. Determine distribution of emission allowances for the benefit of retail ratepayers by consumer class based on revenue rather than electricity deliveries.

3. Mandate that state commissions processing the requirements of this section provide intervenor funding to offset expenses incurred by public interest groups intervening on behalf of household consumers. This will help ensure that public interest groups with limited resources will be financially reimbursed for their work fighting on behalf of working families before state utility commissions.